In August, the two Texas Senators and several of its Representatives revealed their hypocrisy in the exercise of fiscal responsibility. In 2013, they refused to support Hurricane Sandy relief efforts for New York and New Jersey. But these stalwarts of principle quickly pressed for relief funds for the damage in Texas by Hurricane Harvey.
It seems that fiscal responsibility is not an important principle if the designated spending is for their benefit. In other words, they have no principles, only self-interests. Nonetheless, relief efforts for Texas are warranted. We are one country. When disaster hits one section of the country, others should come to its aid.
Self-interest at the expense of others is not very honorable. It is, at least, understandable when dire circumstances dictate that self-interest. However, complete repudiation of fiscal responsibility is not understandable. Throughout the Obama administration, Republicans continually, consistently and loudly pressed for cuts in spending to reduce the deficit. They expressed their passion for not leaving a mountain of national debt and mortgaging their children’s future.
Notwithstanding that oft expressed viewpoint, Republicans have never retreated from their ideological bedrock philosophy that lower tax rates will stimulate the economy. There are periods historically when lowered tax rates produced a burst of jobs, for example during the Reagan administration. But the fact is, under the Clinton and Obama administrations, tax rate increases created far more jobs.
The Kansas Experiment
Lowering tax rates in the expectation that revenue shortfalls will be offset by economic growth can have disastrous consequences. The experiment of the State of Kansas is the most recent example of its catastrophic result. Led by its Governor, Sam Brownback, Kansas authorized tax and spending cuts in 2012 and 2013. He argued that this fiscal formula would create explosive economic growth. It did not. Economic activity and job creation were lower than the economies at the national and neighboring state levels. But that was the least of Kansas’ problems.
Despite reductions in spending on education and other public services, the resulting shortfall in tax revenue caused the state’s budget deficit to explode. To fill some of its holes, Brownback diverted money from other funds and reduced pension contributions for teachers and government workers. This was nothing more than an accounting trick that does not cut costs, but moves them to the future. However, this too, was too little too late.
Finally, earlier this year, the Republican controlled legislature voted significant tax increases to reduce the huge budgeted shortfall in revenue. Then the Legislature overrode Brownback’s veto.
The Bush Tax Cuts and Consequences
But these consequences are not limited to the state level. There is a relatively recent example of similar results at the national level. In 2001 and 2003, the George W. Bush administration reduced income tax rates. The largest percentage reductions went to the top 1% of households. Despite claims by its proponents, these cuts did not improve economic growth. Instead, since they were financed by borrowing, they greatly expanded the national debt.
The Center on Budget and Policy Priorities estimates that including debt service costs, “the Bush tax cuts … would add $4.2 trillion to deficits over 2009 to 2019” … They “would be responsible for roughly 40 percent of federal debt owed by 2019.” And lest we forget, in December 2007 the Bush administration suffered the start of the worst recession in the country’s history since the Great Depression. From 2008 to 2009 about 8 million jobs were lost. Ironically when the Bush tax cuts expired and the highest rate was restored, job growth returned.
The Failure of Supply Side Economics
Clearly, these experiments in supply side economics are unmitigated failures. Yet the supposedly fiscally responsible but hypocritical Congressional Republicans are now proposing to take the country down the same disastrous path. This could add $2 trillion to the national debt. But this is now beyond hypocrisy. This is dishonesty—knowing how harmful this policy will be, yet still moving forward. Hopefully there are enough Republicans who do believe in fiscal responsibility and will not follow their hypocritical and dishonest brethren.